9911796707
TMI Blog1977 (4) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... the 26th May, 1965. In the return of wealth-tax filed by the assessee this amount was included. In the assessment, the Wealth-tax Officer included the entire sum of Rs. 2,03,176, on the ground that both the disclosure and the payment of tax thereon were after the relevant valuation date. Being aggrieved, the assessee appealed to the Appellate Assistant Commissioner of Wealth-tax contending that the income-tax liability on this disclosed sum ought to have been allowed as deduction in computing the net wealth. The assessee relied on the decision of the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Income-tax [1966] 59 ITR 767. The Appellate Assistant Commissioner accepted the contention of the assessee and allowed the appeal. The revenue preferred a further appeal to the Tribunal. It has contended before the Tribunal that the decision of the Supreme Court did not apply in the facts and circumstances of the case inasmuch as the tax liability was consequent to the declaration made under a specific provision of the relevant Finance Act, something unforeseen and, therefore, such liability could not be stated to have arisen on the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withstanding anything contained in the said Acts, be charged income-tax at the rate specified in sub-section (3) in respect of the amount so declared if he,-- (i) pays the amount of income-tax as computed at the said rate, or (ii) furnishes adequate security for the payment thereof in accordance with sub-section (4) and undertakes to pay such income-tax within a period, not exceeding six months, from the date of the declaration as may be specified by him therein, or (iii) on or before the 31st day of May, 1965, pays such amount as is not less than one-half of the amount of income-tax as computed at the said rate or furnishes adequate security for the payment thereof in accordance with sub-section (4), and in either case assigns any shares in, or debentures of, a joint stock company or mortgages any immovable property, in favour of the President of India by way of security for the payment of the balance, and undertakes to pay such balance within the period referred to in clause (ii). (2) The declaration shall be made to the Commissioner, and shall specify the period required to be specified under clause (ii) of sub-section (1), contain the name, address and signature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be intimated to the Income-tax Officer." Section 2(m) of the Wealth-tax Act, 1957, is as follows : " 2(m) 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than-- (i) debts which under section 6 are not to be taken into account; (ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not charge. able under this Act; and (iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958),-- (a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act shall nevertheless have effect on the basis of the provisions proposed in the Bill before Parliament or the provision in force in the preceding year which had been actually in force, whichever was more favourable to the assessee. The Supreme Court concluded that the tax liability at the latest would arise on the last day of the accounting year. On the concept of "debt" the Supreme Court held as follows : " A debt is a present obligation to pay an ascertainable sum of money, whether the amount is payable in praesenti or infuturo : debitum in praesenti, solvendum in futuro. But a sum payable upon a contingency does not become a debt until the said contingency has happened. A liability to pay income-tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data. There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability. The rate is always easily ascertainable. If the Finance Act is passed, it is the rate fixed by that Act; if the Finance Act has not yet been passed, it is the rate proposed in the Finance Bill pending before Parliament or the rate in force in the preceding yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rises out of the order of the Income-tax Officer. Before imposing liability for additional super-tax, the Income-tax Officer has to determine whether the company is one to which the provisions of section 23A apply; he has also to determine whether the company has distributed within twelve months immediately following the expiry of the previous year the statutory percentage of the total income of the company as reduced by the taxes and levies prescribed therein ; he has also to determine whether, having regard to the loss incurred by the company in the earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable. It is after making these enquiries that the Income-tax Officer may make the order directing payment of additional super-tax at the rates prescribed. The process to be followed is not the process of assessment, but of determining whether the liability should be charged and imposed... But the provisions of section 23A have to be construed as they stood before the Act of 1961 was enacted, and the mere fact that the legislature has chosen to specify a period of limitation fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and paid tax accordingly, his assets would be reduced to the extent of the tax. Having held this, the High Court further went on to hold that the amount of tax paid under the said section was not a debt owed by him on the valuation date. But it was also held that the assessee even after disclosure was liable to be assessed under the relevant Income-tax Act if he did not comply with the other conditions laid down in this section, and if the assessee did not make any disclosure at all the said income could still be discovered and brought to tax. Liability for such tax, however, would be debt owed by him and could be deducted from his gross wealth, but the amount payable by the assessee under the scheme provided by section 68 compounding the income-tax liability could not be a debt owed by the assessee on the relevant valuation date. The next decision cited was Commissioner of Wealth-tax v. Ahmed Ibrahim Sahigara [1974] 93 ITR 288 (Guj). This is a decision of the Gujarat High Court in a reference under the Wealth-tax Act, 1957. The point involved in the reference before the High Court was the same as in the instant case, i.e., whether in the computation of net wealth, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income-tax liabilities in respect of the half share of the assessee of the income-tax paid by the firm on the amounts disclosed voluntarily under section 68 of the Finance Act, 1965, is a debt under section 2(m) of the Wealth-tax Act, 1957, on the dates of valuation for the assessment years 1959-60 to 1964-65 ? " The High Court considered and construed section 68 of the Finance Act, 1965, in the context of the Indian Income-tax Act, 1922, and the Income-tax Act, 1961. A decision of the Supreme Court in the case of Commissioner of Income-tax v. Khatau Makanji Spinning and Weaving Co. Ltd. [1960] 40 ITR 189 as also the decision of the Gujarat High Court in the case of Ahmed Ibrahim Sahigara [1974] 93 ITR 288 and the decision of the Kerala High Court in the case of C. K. Babu Naidu [1971] 82 ITR 410 were cited and considered. The Delhi High Court agreed with the Kerala High Court to the extent that under section 68 of the Finance Act the assessee could compound his income-tax liability in respect of his undisclosed income which he may choose to disclose under the scheme and that by such disclosure the assessee did not incur a liability to pay any tax under the said section. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that section 4 of the Income-tax Act, 1961, the charging section, lays down that income-tax is payable not " on the total income " but in respect of the total income. The concept of total income is necessary only for the purpose of quantifying the tax which will ultimately be due. Therefore, one of the distinctions sought to be drawn by the Gujarat High Court was not correct. We have carefully considered the respective submissions of the parties as also the different decisions cited before us. Reading section 68 of the Finance Act, 1965, it appears to us that the said section does not impose a new charge. The section permits a declaration of an amount by the assessee. This amount the assessee has to disclose on the express basis that it represents his income; and further that the assessee had failed to disclose this income earlier under the relevant Income-tax Act; or that this income has escaped assessment in any earlier assessment year ; or that no proceedings have been taken for the assessment of this income before the 1st March, 1965. Therefore, it is clear that the disclosure envisaged under section 68 is in respect of an amount which is already liable to be assessed as inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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